While renters insurance is a crucial asset in protecting resident property, many tenants don’t know that flooding is excluded from a standard policy. As a result, incidents of extreme weather or infrastructure failure can leave them vulnerable to major losses.
As a property manager, you may want to educate your customers about flood insurance and how it can bridge the gap left by standard renters insurance. In this guide, we’ll cover how flood insurance works, what it covers, and how renters can buy a policy.
What Is Flood Insurance for Renters?
Flood insurance is a policy sold separately from standard renters insurance that protects against flood damage. This may include losses from natural disasters or human-caused incidents– including sudden rainfall, rapid snow melt, or runoff from new construction.
Oftentimes, landlords or property owners have their own flood insurance to cover damage to the building structure. However, renters need to get their own policy to protect their personal property.
Most consumers secure flood insurance through the National Flood Insurance Program (NFIP), managed by FEMA. The program’s contents-only flood insurance policy is available to renters living in an NFIP-participating community and insures personal items in the rental unit damaged by a flood.
What flood insurance covers
Imagine Lisa, a young professional renting a second-floor apartment in a charming riverside town. One spring, unusually heavy rains cause the river to swell rapidly. Despite the town’s flood defenses, water begins to seep into the apartment. Within hours, her home is submerged in a foot of murky water.
When the flood recedes, the devastation is clear. Her new leather sofa is waterlogged, her smart TV and laptop are ruined, and her clothes and shoes are caked in mud.
Without flood insurance, she’d be facing a financial disaster. Her standard renters insurance policy wouldn’t cover the flood damage, and her landlord’s insurance only covers the reconstruction of the walls and flooring. Federal disaster assistance, if available, would come in the form of a loan.
Fortunately, because Lisa purchased flood insurance, she’s able to file a claim. Her policy pays out the value of her furniture, electronics, and clothing. While the experience is still stressful, she’s not left financially devastated.
Common limitations
While NFIP flood insurance can be critical for renters affected by a flood, it does come with several restrictions that policyholders should be aware of.
- Renters can choose to purchase up to $100,000 worth of coverage, which insures their belongings on an actual cash value (ACV) basis
- Coverage for luxury items like artwork or jewelry is limited to $2,500
- Belongings on the lowest elevated floor or basement are not covered, with the exception of a washer, dryer, freezer, and the food inside
- Paper valuable such as cash or certificates are not covered
- Additional living expenses such as hotels and restaurant meals are not covered
Understanding the different types of water damage
Dealing with a water-related insurance claim can be relatively complicated. When it comes to water damage, each situation will typically fit under one of three categories: sudden water overflow, flooding, and sewer backup.
Accidental discharge or overflow of water or steam
Covered by most standard renters insurance policies
This includes water damage that happens suddenly and unexpectedly, such as from malfunctioning appliances or burst pipes. It could also cover accidental damage, such as your upstairs neighbor falling asleep while drawing a bath, leading to water raining from the ceiling onto your personal belongings.
Flooding
Covered by NFIP flood insurance
This refers to water damage caused by external sources, such as heavy rainfall, overflowing rivers, or storm surges. For example, if your ground-floor apartment is inundated during a severe rainstorm, or if melting snow causes nearby bodies of water to overflow into your building.
Sewer backup
Covered by an insurance rider
This occurs when wastewater reverses direction and flows back into your living space through toilets, sinks, or drains. It could happen due to a clog in the main sewer line, tree roots interfering with pipes, or the municipal sewer system becoming overwhelmed during heavy rains. For instance, you might experience this if your bathroom suddenly starts flooding with foul-smelling water during a rainstorm.
Buying a Flood Insurance Policy: How to Get Started
Securing flood insurance coverage is a bit more difficult than buying a standard renters insurance policy. Let’s go over the steps to getting coverage as a tenant, starting with deciding whether it’s even necessary.
Assess your risk with the FEMA flood map
The Federal Emergency Management Agency (FEMA) provides many resources to help consumers navigate flood insurance. When determining whether to buy a policy, many renters reference the FEMA flood map, which indicates the level of flood risk based on geography. You can retrieve a map for your area on the FEMA website, along with a resource on how to interpret it.
See if your community participates in the NFIP
In order to enroll in a flood insurance policy from FEMA, you must live in a community that participates in the NFIP. To find out whether you’re eligible, you can reference FEMA’s community status book. Tenants who live outside of participating communities may be able to find private flood insurance– just be aware that it comes with a different set of rules and policies.
Find an insurance agent
To buy NFIP flood insurance, you need to go through a qualified insurance company or agent. In some cases, your renters insurance provider may be able to help you. You can reference this guide to find out if you can go through your existing carrier, or find a participating one.
Choose the right plan
As a renter, you’ll want to select a contents-only flood insurance policy. Then, based on your home inventory list, you can choose how much protection you want to purchase up to $100,000.
When deciding on a plan, note that your insurance premiums will be determined by several factors:
- Building age and claims history
- Building occupancy
- Your chosen deductible
- Number of floors
- Amount of coverage
- Location of contents
Recommending Flood Insurance to Your Residents
As a landlord or property manager, you may not be able to control whether or not your residents get flood protection. However, you can help them understand their options and calculate the cost-benefit of getting coverage.
Start by incorporating information about flood insurance into your onboarding materials. Gather some important FEMA resources (including the ones we’ve linked), and send them to your renters. This can help them decide whether buying a separate flood insurance policy is worth the investment. From a liability standpoint, it can also communicate where responsibilities lie in the event of an unexpected flood event.
Here’s an example of a lease clause from a large rental company that mentions flood insurance:
INSURANCE. Except as required by state law, we do not maintain insurance to cover your personal property or personal injury. We are not responsible to any resident, guest, or occupant for damage or loss of personal property from (including but not limited to) fire, smoke, rain, flood, water and pipe leaks, hail, ice, snow, lightning, wind, explosions, earthquake, interruption of utilities, theft, hurricane, negligence of other residents, occupants, or invited/uninvited guests or vandalism unless due to owner’s omission, fault, negligence, or misconduct.
In addition, we urge all residents, and particularly those residing in coastal areas, areas near rivers, and areas prone to flooding, to obtain flood insurance. Renter’s insurance may not cover damage to your property due to flooding. A flood insurance resource which may be available includes the National Flood Insurance Program managed by the Federal Emergency Management Agency (FEMA).
More Ways to Protect Your Business
If you have a rental property in an area with a high risk of flooding, encouraging your tenants to get a flood insurance policy may be a smart business decision. Looking for more ways to risk-proof your business? Talk to our team and learn how you can get hands-free insurance verification and monitoring with CheckMy Resident.
Related: Five Steps to Setting Up the Best Renters Insurance Verification Process